With Great Power Comes Great Flexibility: The Impact of Prestigious CEO Awards on Innovation
54 Pages Posted: 11 May 2020
Date Written: April 15, 2020
Contrary to the previous literature, we document that winning a prestigious CEO award can be beneficial to firms by reducing managerial career concerns and encouraging long-term productivity. Using propensity score matching techniques, we find that award-winning CEOs innovate more than the control group, both in terms of the number of patents and the number of citations per patent. This finding is consistent with both managerial flexibility and overconfidence theories, and inconsistent with the private benefits view. After further analysis, we show that there is a clear increase in CEO power and job security after winning a prestigious award and no such increase in several measures of overconfidence. We also document that the positive effect of CEO awards on innovation is weaker for firms with high institutional ownership. These results provide overall support for the managerial flexibility theory.
Keywords: superstar CEO, business awards, prestigious awards, innovation, managerial entrenchment, corporate governance, agency theory, managerial myopia, overconfidence, institutional ownership
JEL Classification: O31, G34
Suggested Citation: Suggested Citation